Channel conflict news

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ARN: With Harvey Norman and Harris Technology expressing concerns about direct online selling, it would appear some of your retailers are a bit distressed with IBM at the moment?

EW: Our Harvey Norman relationship has come to a point where we are going down different paths. Our position is that we are continually trying to work with them so that we can get a business model we both want to work with.

It is unfortunate but we are looking to do business with them in the future. We still have a very good working relationship with them and we will explore opportunities.

What is the purpose and long-term plans for the IBM online direct-selling initiative that is causing grief for these retail partners?

EW: There is no doubt we are selling direct in the VSB (very small business) space. We are giving customers a choice in how they want to purchase IBM products, but we are still predominantly selling through partners in that VSB space and will continue to do so.

Direct sales are still a small percentage of our business and we don't see that changing going forward. We are at a point where we can allow customers to buy directly from us if they want to, but we also have a very strong business partner channel.

Does IBM target the SOHO and home consumer markets that Harvey Norman is so dominant in?

EW: No it doesn't. You will see that our advertisements are mainly pitched towards the VSB and small business market, and that will continue to be the case in the future. We have never advertised PCs for the home in our ads.

Are those VSB sales the ones you are driving to have a direct-sales option?

EW: Let's be very clear: what we are doing in that space is advertising IBM and giving buyers the choice of how they want to purchase - through channel partners or direct via the Web site. There are some very technically savvy companies in that market and they want to buy online, but we are still finding that the dominant part of the market wants to leverage our business partners and the value-added services they provide.

Do VSB customers buy from retail outlets and, if so, aren't you missing a lot of potential sales by not being on Harvey Norman shelves?

EW: Our research does not show that very small businesses are walking into that environment. I do know that Harvey Norman has a commercial operation that it is looking to use to get to that market, so we are still hoping to work with them on their aspirations for that part of the market.

Is the loss of Harvey Norman as a retail partner going to hurt your PC business or is it something that you are not particularly worried about?

EW: It is always a concern when we have a channel partner that we are not doing business with for a period of time and we have had a great relationship with HN over a long period of time.

Is there any room for movement in the relationship with Harvey Norman?

EW: We have definitely reached an impasse as far as the consumer market is concerned. I think there is still a big opportunity in the VSB part of the market with a commercial product.

Does the split with Harvey Norman leave you with a big hole in retail sales at the moment?

EW: Not really. We are currently doing business with about 10 other large retailers.

So how would you define IBM's go-to-market model to address the VSB market?

EW: It is important to be clear that we are talking about two separate markets: the VSB market, which is commercial; and the consumer market. The commercial area is a big focus for IBM and we are going to drive innovative solutions to that market through business partners.

Are there any products available online that are not available to the channel?

EW: As a general statement, no. There may be some end-of-life products, but our commitment is that everything for sale on the Web site is also available to the channel.

Is the consumer market an area where IBM no longer wants to play or is it just dead at the moment?

EW: We continue to look at markets where we can do business profitably. The consumer market has come down so IBM will be concentrating on the commercial part of the market.

So, would it be fair to say that retail is not central to your plans going forward?

EW: No I wouldn't say that is a fair comment. A fair comment is that we are offering customers a choice in that market.

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